After scathing HUD report, director out at OHA

After years of sifting through suspicious practices committed in the name of the Orange Housing Authority, the U.S. Department of Housing and Urban Development (HUD) has issued orders to the public authority to make immediate changes to the way it conducts business.

The “shape up” order comes on the heels of a Sept. 22 meeting held with Orange Housing Authority (OHA) executive director Frank Anderson, two OHA board members and HUD staff conducted at the housing authority’s Burton Street address.

“At that meeting,” Houston Office of Public Housing director Dan Rodriguez contends, “it was evident that numerous expenditures of the housing authority and overall operations involving a single bank account raised serious questions as to the existing financial operations, internal controls and oversight.”

Rodriguez, who heads the field office responsible for overseeing HUD funding to Southeast Texas, reported that OHA was in need of heightened scrutiny due to the agency’s recently-declared “troubled” status. He said the added evaluations were an effort to “bring (OHA) back into compliance and performing within its established guidelines.”

Furthermore, said Rodriguez, OHA staff and management were put on notice in May 2011 for “significant deficiencies” noted at that time. Additional follow-ups and reviews, said Rodriguez, “discovered further examples of serious and material irregularities in the financial operations of the housing authority.”

Subsequent meetings with executive director Anderson produced inadequate answers to questions Rodriguez had regarding how HUD funds were being spent and brought to light “several instances of unilateral actions carried out” by Anderson that prompted Rodriguez to determine OHA was under “inadequate governance.”

In addition, a letter sent to the OHA board of directors and copied to the city of Orange and various HUD entities outlines in detail numerous “serious and material irregularities” noted by the federal agency:

• Undeclared bank account controlled solely by executive director Anderson – According to the report filed by Rodriguez, “The records of this account were held separate and apart from the (housing authority’s) operating account.” Most of the checks cashed from the account, the report states, were only signed by Anderson.

• Pilfered funds – Through monitoring reviews performed by HUD, it was revealed an insurance proceeds check was awarded jointly to HUD and OHA following Hurricane Ike. HUD was never notified of the check, however, and according to Rodriguez, the endorsement was signed by Anderson on HUD’s behalf without approval. This was, the HUD official noted, “a flagrant abuse of authority.”

• Missing cash – Multiple cash withdrawals of OHA funds were made by Anderson, the report states, as were multiple withdrawals in the form of checks cashed by the executive director.

• Circumventing service procurement – Rodriguez’s report details a specific circumvention technique used by the housing authority, wherein OHA contracted with an individual “broker” for multiple activities “in an effort to avoid public bid requirements.”

• Tax evasion? – Serious questions remain unanswered, according to Rodriguez, after he learned that some OHA staffers were paid in cash without “adequate support documentation and no evidence of reporting applicable payroll taxes to the IRS and state.”

• Suspicious payments – At least one instance of diverting funds was uncovered by the HUD review, said Rodriguez, in that a check was made payable to a third party for the express purpose of cashing the check and forwarding to proceeds to someone else.

• Millions unreported, insurance fraud – Insurance proceeds from Hurricane Ike totaling more than $2 million were absent from independent audits performed on behalf of OHA. An audit performed on the housing authority for fiscal year 2008 lists the funding as “anticipated,” but future audits have not declared the funds in any of the authority’s accounts although the money was distributed years ago. To go along with no recorded funds from the hurricane-related insurance claims, HUD has also found no records of completed hurricane-related repairs.

• Inadequate monitoring – Although the majority of the discrepancies noted by the HUD official dealt with managerial malfeasance and/or executive director Anderson, Rodriguez also had stern admonishments for the OHA board of commissioners. According to his review, the board has been amiss in overseeing the housing authority, allowing the above-noted problems to arise due to negligence. It is his opinion that, “No review of contracts appears to have been conducted.” If the board was doing its job, it is contended, at the very least, “it would have been obvious that no insurance proceeds were reported.”

In addition to this list, other “serious and material irregularities” were also addressed. The detailed accounts of infractions listed here “is by no means all-inclusive,” Rodriguez said. “It represents a sample of the irregularities discovered at (OHA).”

Rodriguez told The Examiner that it would be “premature” to comment on what steps will be needed to rectify the problems at OHA. He then said that in the “near future,” it is likely “there will be more involvement, more oversight, and more communication” from HUD as it relates to the business dealings of OHA.

Part of the increased oversight and communication anticipated from HUD will come in the form of assisting OHA with naming an interim executive director for the housing authority. In the days following the receipt of Rodriguez’s correspondence, Anderson was relieved of his post although it is unclear whether it was of his own volition. Orange city manager Shawn Oubre said he was only told “Frank (Anderson) is gone. I’m not sure how it came about.”

A trip to OHA confirmed that Anderson was no longer in the building, and staffers and board members present in the office referred further questioning to OHA board of commissioners president Mary McKenna. A woman answering the phone for McKenna said, moments after she learned the caller was a newspaper reporter, that the board director “just now left to go out of town.”

Calls seeking comment from recently acquired attorney Guy Goodson were unanswered as of press time. According to city manager Oubre, Goodson was secured by the housing authority after Rodriguez’s report was released to sort through and address HUD’s findings.

Regional HUD spokeswoman Patricia Campbell was able to shed some light on the future of the housing authority. According to her, HUD’s role in monitoring housing authorities is to ensure the programs are running smoothly and correctly.

“Basically, our goal isn’t to punish; it is to correct where we see corrections need to be made,” Campbell said, referring to a general mode of operation utilized by HUD representatives. “Punishment is at the very farthest end of the spectrum, from a general background. But if in the process we found a problem that arose to a criminal level, we would refer the matter to the Office of the Inspector General.”

The Office of the Inspector General, she said, is the legal arm of federal agencies. According to her, OHA’s case has been referred to the Office of the Inspector General for its review.

In broad terms, Campbell said in order to rectify a complaint made by HUD on a housing authority, “Normally the remedy is you do whatever you wasn’t doing — right.” As it relates to OHA, she said, “The board of commissioners is responsible for the financial administration of the housing authority. They have full responsibility for compliance with HUD rules and regulations and will be asked to authorize all changes necessary to make OHA compliant.”

In Rodriguez’s opinion, Anderson’s removal alone won’t satisfy the complaints, he said. Campbell said HUD is still determining what actions need to be taken by the OHA, and what actions HUD is planning on taking on behalf of the federal government.

“HUD will review all component units of OHA and any entities into which housing authority monies were channeled,” she said. “HUD will be reviewing all aspects of the housing authority’s financial structure, and any irregularities will be dealt with according to HUD’s rules and regulations. At this point, we have no specifics, but if we determine that monies need to be repaid to HUD, we will require repayment.”

In a brief description of HUD’s role in the matter, Campbell said, “What we do is make sure taxpayer dollars are being spent the way they’re suppose to be being spent.” When followed with a question as to whether of not OHA’s funding was in jeopardy, Campbell responded by saying, “That has not been determined at this time.”

Campbell said that HUD officials will be in Orange in the coming weeks “to visit with, and provide assistance to, the interim executive director, and to assess immediate needs.” OHA staffer Tanya Wilson is anticipated to take over as the interim leader of the housing authority when the board of commissioners approves the post, expected during a meeting called for 10 a.m. Friday, Oct. 21.

Jennifer Johnson can be reached at (409) 832-1400, ext. 231, or by e-mail at jennifer [at] theexaminer [dot] com.

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